Last week we gave some description and color to how we are approaching identity verification on the Holo network. We know that many people have also been asking about HOT and Holo fuel and especially the swap, all of which we first introduced in the Holo Green Paper, and described in more depth in the Currency White Paper and earlier blogs about building a responsible cryptocurrency.
As you may recall from those, buying HOT is essentially buying pre-purchased credits for hosting. Not only is Holo fuel expressed as a mutual credit accounting of value, what we have done is put at its heart a productive economy rooted in hosting distributed web apps so that the currency has intrinsic value measured in terms of how much hosting power (CPU, bandwidth & storage) you receive. This is quite different from algorithm-based coin pools with a fixed supply.
The HOT and Holo fuel currencies and really, Holo itself has been architected for a long-term approach to value. It was not created with an intention to be solely an investment. The currencies do not have a specific mechanism for return or reward, as would a security token, and the overall design is oriented towards value stability, not volatility, or equity appreciation. The value of Holo fuel is, therefore, intended to grow with the steady and very real growth of the network.
Where it gets interesting, however, is that we intentionally priced HOT and therefore also Holo fuel at what we believed was a significant discount to its underlying value at the time, to incentivize initial backers and adopters. If you look back to our benchmarking for Holochain, we demonstrated increases in efficiencies ranging from 10,000x to over 1,000,000x as compared to Ethereum. The ICO price was set at the lowest level of those benchmarks, leaving a lot of room for value increases as we launch and begin the process of framework and platform adoption. As we shared in our Holo Green Paper and Currency White Paper as well, these increases are intended to both reward early adoption and support the infrastructure and development needs of Holo as we grow the ecosystem of app developers.
In future articles, we will explore currency design details as well as our strategies and plans for adoption and the growth of Holochain and Holo. But for now, we want to dig into how the HOT to Holo fuel swap will work and some changes to our design that we want to introduce.
About the Swap
The original plan in our Holo Green Paper called for Holo Tokens (HOT) to be burned when redeemed for Holo fuel. This “swap-and-burn” was based on the conventions of other token swaps. However, as we have incorporated feedback from the community and refined our currency design we have found that until our ecosystem matures this method may invite structural instability. Instead, allowing the community to swap back and forth between HOT and Holo fuel provides far more liquidity for our users.
HOT will still be swapped at a 1:1 value, but instead of burning the tokens, they will temporarily be taken out of circulation and held in a Reserve Account. Hosts can redeem Holo fuel for HOT just like any other reserve currency. This allows HOT to serve as a bridge to crypto markets and provide critical liquidity for people in the early stages of Holo fuel.
This change is necessary because each reserve stabilises Holo fuel relative to that reserve’s currency. This means that Holo fuel takes on some of the reserve currency volatility characteristics. Given the extreme volatility and issues facing existing cryptocurrencies, we hesitate to link Holo fuel to them. Using HOT as a reserve currency provides Holo users with a path to cash in and out of cryptocurrencies, while preventing Holo fuel prices from being bound to the volatility and issues of other projects.
This change is not dilutive because it does not add any additional HOT or Holo fuel into circulation. The initial conversion of HOT into Holo fuel does not change, and HOT only re-enters circulation when an equivalent amount of Holo fuel is redeemed and taken out of circulation at a reserve.
While we recognise this is a significant change from our Holo Green Paper, we believe it is in the best interest of the network, community, and individual token holders. Another advantage is that this decision allows us to delay burning HOT tokens until it works better for the whole community, such as when Holo fuel is more widely accepted and traded.
3rd Party Exchanges: Expectations and Promises
Many people are especially interested in what is happening for Holo fuel when it comes to 3rd Party Exchanges; there have even been some tweets and statements made by our team in the past. One of the reasons we have been a bit quieter on this front lately is because Holo fuel is not as well known as an ERC20 token like HOT. We are still working out how Holo fuel will be treated with regulatory groups and evaluating our approach as to how we want it to be treated by various jurisdictions.
Holo fuel is a real utility currency, but distinct from almost all others. It is an accounting currency, as we explain in our Holo fuel 101, and we want to ensure it does not accidentally get categorised as another type of financial instrument. Because of this, we are simply being careful about what we promise.
We are absolutely aware that some exchanges have indicated an interest and intention for listing Holo fuel. We are just not yet certain when that will happen or how it will work, but we’ll keep you posted with any new information.
Releases of Holo & Holo fuel
When it comes to timing, please know that Holo fuel will officially launch directly with the release of Holo Beta Mainnet*. Prior to that we will be testing our fuel application along with many other functional aspects of Holo. Announcements with details about releases, including the specific features and some of the intended testing, will be forthcoming to participants and more broadly to our community prior to each Alpha Testnet release. The scheduled releases, beginning as soon as February, are as follows:
- Holo Closed Alpha Testnet (not public, available only to Alpha/Beta backers in IGG) PROMISED IN FEBRUARY
- Holo Open Alpha Testnet**
- Holo Full Feature Testnet**
- Holo Beta Mainnet**
*As a reminder, HOT will convert 1:1 to Holo fuel and the window for swapping will open directly after the Holo Beta Mainnet release for a minimum of six months.
**The time frame for milestones 2–4 will be confirmed and announced as the information is finalized.
We truly appreciate the engagement and commitment of our stakeholders and community who support and follow this project. We will continue to address the desire for more detailed information. It will be shared weekly here in this communication as well as in many other channels, including our successful Holochain Dev Pulse, and also new focused and regular communications.
— Holo Executive Director, Mary Camacho